How Twitter could fight a takeover by Elon Musk


So Thursday’s offer wasn’t unexpected, but that didn’t stop it from becoming a circus. Twitter shareholders don’t know what to think. The stock posted notable premarket gains on Thursday, topping $48 a share before ending the day down 1.7% to just over $45. Analysts contradict each other, with Loup Ventures’ Gene Munster telling CNBC, “It’s likely to happen,” and Ben Laidler, global markets strategist at eToro said Reuters, “This opens up a battle for control between [Agrawal and Musk].”

Other entrepreneurs, such as Mark Cuban, interfered, and said: “I think Twitter will do everything it can not to sell the company. They’re going to try and get a friend to come in, buy Elon’s stock and get him out.”

Heck, even Musk said at a TED event Thursday afternoon, “I’m not sure I’m going to get it.” He also cryptically said there was a “plan B” if that takeover bid didn’t go through, but declined to elaborate.

Whether Musk means business or not In its attempt to buy Twitter, the action certainly brings the social media company into play. And if it wants to fend off Musk — or whoever’s next — Twitter has a few options, including simply rejecting the offer (although that could lead to shareholder lawsuits if they think the company isn’t in its best acted in an interest). .

swallowing a “poison pill”

This is the most well-known anti-takeover method for most people. The controversial defense, first used in 1982, dilutes stock and reduces shareholder ownership of the company to the point that hostile bidders cannot gain a controlling interest in the company without spending much more than they had planned.

Unfortunately, not only the purchaser is frustrated. Common shareholders also see their holdings diluted, which tends to put off institutional investors.

There are also some alternative poison pills. A “flip-in pill” allows the company to issue preferred stock to existing shareholders (although that may not help since Musk already owns more stock in the company than anyone else). A “flip-over pill” allows shareholders to buy the acquirer’s shares at a discounted price. Netflix used this against Carl Icahn in 2012.

The Wall Street Journalon Thursday afternoon, reported that the company actually Weighing a poison pill that would appeal to Musk’s offer.

surrender to demands

Some companies try to put an end to hostile takeovers by accommodating the potential buyer’s needs. In Musk’s case, that would be a Edit button, no ads on Twitter Blue, Dogecoin acceptance and the elimination of crypto spam bots. The demands are to be met before the start of the takeover battle. At this point it is obviously too late for that. And given Musk’s history of erratic behavior, Twitter wouldn’t necessarily turn down the offer even if Twitter caved in to some of the things the Tesla co-founder and CEO has grumbled about.

Search for a white knight

Musk said his offer is his “last and last,” and he has no intention of increasing it. That may or may not be true, but one way to test this would be for Twitter’s board of directors to find another interested buyer, ideally one whose vision for the company’s future aligns with the board’s.

But . . . Finding someone willing to spend more than $43 billion who also respects the company’s future plans is a lot easier said than done.

Use of “greenmail”

Musk owns 9.2% of Twitter stock, but the company could potentially buy it back at a premium. In theory, that would rule out the takeover attempt, but it’s expensive — and it’s fallen out of favor with many companies, as it also has some capital gains tax implications. Also, there’s no guarantee that Musk would be interested in selling his stock. However, if he was looking for a quick way to unload them at a profit, greenmail — derived from the fusion of the words blackmail and greenbacks — could be an enticing method. How Twitter could fight a takeover by Elon Musk


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